In recent years, the amount of technology in the economy has advanced at an unprecedented rate. With this growth, innovative automation has also increased through the use of technologies such as robots and artificial intelligence. In the wake of such technological growth, many have sounded the alarm that there is a threat to employment growth, but are such claims well-founded?

Centered around the debate about technology and job losses is the question of whether or not technology causes permanent job losses that cannot be recovered. It goes without saying that when old technologies are overtaken the specific jobs for that technology decrease in demand. For example, cars caused horse carriage drivers to not be in demand as much as they used to be. The real question is whether or not those new technologies replace old jobs without creating new jobs.

A misunderstanding of the benefits of new technology as a way to actually expand jobs and wage growth can have real effects. This false perspective has gone so far that some have even proposed that the government levy extra taxes on automation technology, such as robots. Proponents of this “robot tax” argue that if a robot produces income that an individual might have produced, then the government should tax the robot’s “income” to make up for the lost tax revenue. 

Rather than viewing technology through the lens of big government, one of the most effective ways to understand the positive effect of future technologies is to look back on the technologies of the past. Around 1810, in the wake of the Industrial Revolution, some workers openly opposed the integration of machinery into trades that had been traditionally done by manual labor. The protesters became known as Luddites, with many of them resorting to the open destruction of machinery.

But time would show that the Luddites had been misplaced. In the decades that followed, the standard of living began to improve as the ability to produce goods and services became more affordable. This meant that while basic implements such as clothing and utensils were often expensive for the average family to afford in prior days, machinery enabled the mass production that made these things within the average family’s reach. In addition, to basic living standards increasing, new technology brought about an overall increase in the amount of available goods and services.  

These lessons from history stand true today. The average worker has a far a higher standard of living than former days and and can use technology to generate more value than the average worker of prior days. For instance, the industrialization of farming has drastically increased the amount of profits that the average farmer can produce per acre. A manufacturing worker can oversee millions of dollars in daily production from a computer dashboard. Data system administrators can oversee millions of financial transactions in a day.

All of these factors mean that individual workers are able to bring more value to companies by harnessing the power of new technology. When the average worker is able to bring higher value and profits for companies, there is a cascading effect that ultimately allows companies to expand and have more openings for employment.

Free market innovation is a catalyst for true growth, and technological advancement is a key way to make that happen. Therefore, rather than imposing excessive regulations and even considering counterproductive policies such as a “robot tax,” government should realize and support the employment potential that comes with technological growth.